"Employee" as defined in Section 2(f) of the Act means any person who is employee for wages in any kind of work manual or otherwise, in or in connection with the work of an establishment and who gets wages directly or indirectly from the employer and includes any person employed by or through a contractor in or in connection with the work of the establishment.
All the employees (including casual, part time, Daily wage contract etc.) other then an excluded employee are required to be enrolled as members of the fund the day, the Act comes into force in such establishment.
"Basic Wages" means all emoluments which are earned by employee while on duty or on leave or holiday with wages in either case in accordance with the terms of the contract of employment and witch are paid or payable in cash, but dose not include
a. The cash value of any food concession;
b. Any dearness allowance (that is to say, all cash payment by whatever name called paid to an employee on account of a rise in the cost of living), house rent allowance, overtime allowance, bonus, commission or any other allowance payable to the employee in respect of employment or of work done in such employment.
c. Any present made by the employer.
"Exclude Employee" as defined under pare 2(f) of the Employees' Provident Fund Scheme means an employee who having been a member of the fund has withdraw the full amount of accumulation in the fund on retirement from service after attaining the age of 55 years; Or An employee, whose pay exceeds Rs. Five Thousand per month at the time, otherwise entitled to become a member of the fund.
'Pay' includes basic wages with dearness allowance, retaining allowance, (if any) and cash value of food concessions admissible thereon.
Employee Provident Fund Scheme:
Employees' Provident Fund Scheme takes care of following needs of the members:
(i) Retirement (ii) Medical Care (iii) Housing
(iv) Family obligation (v) Education of Children
(vi) Financing of Insurance Polices
How the Employees' Provident Fund Scheme works:
As per amendment-dated 22.9.1997 in the Act, both the employees and employer contribute to the fund at the rate of 12% of the basic wages, dearness allowance and retaining allowance, if any, payable to employees per month. The rate of contribution is 10% in the case of following establishments:
· Any covered establishment with less then 20 employees, for establishments cover prior to 22.9.97.
· Any sick industrial company as defined in clause (O) of Sub-Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 and which has been declared as such by the Board for Industrial and Financial Reconstruction,
· Any establishment which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and
· Any establishment engaged in manufacturing of (a) jute (b) Breed (d) coir and (e) Guar gum Industries/ Factories. The contribution under the Employees' Provident Fund Scheme by the employee and employer will be as under with effect from 22.9.1997.
The rate of interest is fixed by the Central Government in consultation with the Central Board of trustees, Employees' Provident Fund every year during March/April. The interest is credited to the members account on monthly running balance with effect from the last day in each year. The rate of interest for the year 1998-99 has been notified as 12%. The rate of interest for 99-2000 w.e.f. 1.7.'99 was 11% on monthly balances. 2000-2001 CBT recommended 10.25% to be notified by the Government.
A) A member of the provident fund can withdraw full amount at the credit in the fund on retirement from service after attaining the age of 55 year. Full amount in provident fund can also be withdraw by the member under the following circumstance:
· A member who has not attained the age of 55 year at the time of termination of service.
· A member is retired on account of permanent and total disablement due to bodily or mental infirmity.
· On migration from India for permanent settlement abroad or for taking employment abroad.
· In the case of mass or individual retrenchment.B) In the case of the following contingencies, the payment of provident fund be made after complementing a continuous period of not less than two months immediately preceding the date on which the application for withdrawal is made by the member:
· Where employees of close establishment are transferred to other establishment, which is not covered under the Act:
· Where a member is discharged and is given retrenchment compensation under the Industrial Dispute Act, 1947.
A member can withdraw upto 90% of the amount of provident fund at credit after attaining the age of 54 years or within one year before actual retirement on superannuation whichever is later. Claim application in form 19 may be submitted to the concerned Provident Fund Office.
Accumulations of a deceased member:
Amount of Provident Fund at the credit of the deceased member is payable to nominees/ legal heirs. Claim application in form 20 may be submitted to the concerned Provident Fund Office.
Transfer of Provident Fund account:
Transfer of Provident Fund account from one region to other, from Exempted Provident Fund Trust to Unexampled Fund in a region and vice-versa can be done as per Scheme. Transfer Application in form 13 may be submitted to the concerned Provident Fund Office.
The member of Provident Fund shall make a declaration in Form 2, a nomination conferring the right to receive the amount that may stand to the credit in the fund in the event of death. The member may furnish the particulars concerning himself and his family. These particulars furnished by the member of Provident Fund in Form 2 will help the Organization in the building up the data bank for use in event of death of the member.
Annual Statement of account:
As soon as possible and after the close of each period of currency of contribution, annual statements of accounts will de sent to each member through of the factory or other establishment where the member was last employed. The statement of accounts in the fund will show the opening balance at the beginning of the period, amount contribution during the year, the total amount of interest credited at the end of the period or any withdrawal during the period and the closing balance at the end of the period. Member should satisfy themselves as to the correctness f the annual statement of accounts and any error should be brought through employer to the notice of the correctness Provident Fund Office within 6 months of the receipt of the statement.
What is Provident Fund?
There are two type of provident funds :
1. EPF (Employee Provident Fund)
2. PPF (Public provident Fund)
What are they ?
Employee Provident Fund (EPF)
The Employee Provident Fund, is a retirement benefit scheme that is available to salaried employees.
Under this scheme, a stipulated amount (currently 12%) is deducted from the employee's salary and contributed towards the fund. This amount is decided by the government.The employer also contributes an equal amount to the fund.
However, an employee can contribute more than the stipulated amount if the scheme allows for it. So, let's say the employee decides 15% must be deducted towards the EPF. In this case, the employer is not obligated to pay any contribution over and above the amount as stipulated, which is 12%.
Other Points :
- Return on Investment: 8.5%
- If you urgently need the money, you can take a loan on your PF. You can also make a premature withdrawal on the condition that you are withdrawing the money for your daughter's wedding (not son or not even yours) or you are buying a home.
- tax benefit under Sec 80C.
- The amount if withdrawn after completing 5 years in job will not be taxable.
Public Provident Fund (PPF)
The Public Provident Fund has been established by the central government. You can voluntarily decide to open one. You need not be a salaried individual, you could be a consultant, a freelancer or even working on a contract basis. You can also open this account if you are not earning.
Any individual can open a PPF account in any nationalised bank or its branches that handle PPF accounts. You can also open it at the head post office or certain select post offices.
You can take a loan on the PPF from the third year of opening your account to the sixth year. So, if the account is opened during the financial year 1997-98, the first loan can be taken during financial year 1999-2000 (the financial year is from April 1 to March 31).
The loan amount will be up to a maximum of 25% of the balance in your account at the end of the first financial year. In this case, it will be March 31, 1998.
You can make withdrawals during any one year from the sixth year. You are allowed to withdraw 50% of the balance at the end of the fourth year, preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower.
For example, if the account was opened in 1993-94 and the first withdrawal was made during 1999-2000, the amount you can withdraw is limited to 50% of the balance as on March 31, 1996, or March 31, 1999, whichever is lower.
If the account extended beyond 15 years, partial withdrawal -- up to 60% of the balance you have at the end of the 15 year period -- is allowed.
Where can you open a PPF account (India)
- At designated post offices throughout the country
- At designated branches of Public Sector Banks throughout the country.
- Minimum deposit required is Rs. 500 in a financial year.
- Maximum deposit limit is Rs. 70,000 in a financial year.
-Maximum number of deposits is twelve in a financial year.
- Return on investment : 8%
- tax benefit under Sec 80C , no tax on the maturity and no tax on interest earned.
- If you’re involved in a legal dispute, a court cannot attach or question the money in your PPF account.
Who shall invest in PPF
Its mainly for people who are very conservative and cant take risk to great extent. Any one who wants to invest for long term in some secure saving instrument must invest in PPF. To achieve long term goals there are many option like:
- Mutual Funds (Equity)
- Shares (Equity )
- PPF (Debt)
- Fixed Deposit (Debt)
- NSC (Debt)
Out of these , all under Debt catagory are safe. PPF is the most recommended if the investment horizon is very long like 15+ years.